Home Energy Management with or without an Advanced Metering Infrastructure - Part 1

Why are electric utilities progressing so slowly on residential demand response as peak demand for electricity continues to grow, creating the very real possibility of a serious crisis? Even for those utilities where demand has slowed owing to the economic downturn need to be ready for the rapid growth that will come when the economy strengthens. The crisis initially will be financial, as utilities purchase more power from the limited supply of producers, paying more for wholesale electricity on the spot market, while being unable to translate those higher prices into correspondingly higher retail rates. If utilities continue to move too slowly, peak demand will exceed total available generating capacity sooner rather than later (as the economy expands, the population grows, and electric vehicles become more common), forcing utilities to either build new power plants, or impose more involuntary load curtailments in the form of rolling brownouts or blackouts.

To help avert these crises, utilities have implemented some demand-side management programs, including demand response (DR) and direct load control (DLC). For large commercial and industrial customers, these programs already exist on a fairly large scale. For residential customers, however, perceived obstacles are keeping DR programs in the pilot phase and preventing widespread implementation. Residential demand response is an ideal application for smart meters on the smart grid, but the requisite advanced metering infrastructure (AMI) is only now being rolled out. What utilities need, therefore, is a way to implement home energy management programs on a widespread basis independently of any AMI deployment plans. Before exploring how this is possible, it is useful to address both the promise of and the perceived obstacles to, residential demand response.

Demand Response -- A "Killer Application"

The ability of demand response to avert a crisis is so promising that one member of the U.S. Federal Energy Regulatory Commission identified DR as a "killer application" for the smart grid. The U.S. Energy Information Administration expects electricity generation from traditional power plants to remain constant at about 4 billion gigawatt-hours (GWh) as demand is expected to approach 6 billion GWh by 2030. Making up the difference will require distributed generation, and a mix of demand response and some other measures identified in Figure 1.

Figure 1: GTM Research asked utilities to cite the top three benefits of implementing smart grid technologies. Shown here are the results, with the 'killer application' of a reduction in peak demand ranking first by far.

In the U.S., industrial and large commercial enterprises consume roughly 41% of all electricity generated. This has long been low-hanging fruit for DR because these customers are relatively few in number, and regulators have long supported demand charges for C&I rate payers. Residential and small commercial buildings are not far behind, however, consuming roughly 31% of all electricity generated. Their time for DR has now arrived.

To help lower peak demand in residences, some electric utilities have already implemented DLC for air conditioners and electric water heaters using one-way communications via paging and proprietary radio systems, but most residential price-based and voluntary DR programs are currently only in the pilot stage. The reluctance is not for a lack of need or desire for this "killer application"; rather, it is based in a perception by both utilities and their regulators that residential DR is not quite yet ready for "prime time" given a few remaining obstacles that must first be overcome.

Overcoming the Obstacles

While there can be great comfort in the status quo (especially in the distribution portion of the grid that has yet to benefit from some of the technological advances now found in generation and transmission), every one of the perceived obstacles to DR -- whether technical or regulatory, or whether involving consumer adoption or utility integration -- can now be overcome. This is not to say that the changes will be effortless or painless. For example, because static, non-time-based residential rate structures have long been the norm, the industry has had little experience with time-of-use (TOU, whether dynamically variable or static), critical peak pricing (CPP) and real-time pricing (RTP) rate structures despite the inevitability of such changes to the status quo. The bad news is: Because these new dynamic rate structures are foreign to consumers (and utilities), the industry will not get it right the first time. The good news is: Any "mistake" made in setting dynamic rates initially can easily be remedied later (albeit potentially with some regulators and utility executives experiencing a few battle scars!).

Consumer adoption of any new paradigm takes time. Remember when all gas stations were full service? The change to self-service did not happen overnight. People's awareness of automobile fuel mileage also did not become commonplace until the manufacturers began posting estimated mileage on every new car. And the mileage testing methodology had to be changed a few times to finally get it right.

Consumer acceptance of dynamic pricing and other changes could be an obstacle to widespread adoption and, therefore, an obstacle to success in reducing peak demand. But studies show that the real issue here is consumer education, and rather simple education in the form of effective educational messages that provide meaningful insights into why DR and dynamic pricing are both related and beneficial. The more consumers understand the problem, the more willing they become to participate in the solution. IBM's 2011 Global Utility Consumer Survey found, for example, that respondents who were most knowledgeable about energy issues were 64% more likely to change their usage patterns.

Similar results were revealed in the 2011 Consumer Pulse Survey conducted for the Smart Grid Consumer Collaborative. A full 80% of respondents strongly or somewhat agreed that the smart grid would help them save money, avoid wasting energy, and make the grid more reliable. Perhaps equally surprising is that "political correctness" also ranked quite favorably, with 78% strongly or somewhat agreeing that the smart grid would better protect the environment and help make the U.S. more energy independent. So it should come as no surprise that 75% also now want more control over home energy use and rate/billing choices.

Still not convinced consumers are ready for DR? The 2011 E2 (Energy + Environment) Study by Market Strategies International revealed a rather remarkable result. They categorized respondents into five consumer segments based on their beliefs and preferences: Anything Clean; Ultra Green; Atomic Efficiency; No Nukes; and Carbon is King. The first four segments naturally responded favorably to the question, "Do you support the idea that your electric utility should start now and work quickly to implement Smart Grid technology?" But even a majority of the Carbon is King segment (presumably the least "green" among us) responded favorably!

With a majority of consumers apparently now ready to accept changes in home energy management, what is preventing so many utilities from making progress on this front? Perhaps they perceive yet another obstacle in the maturity of standards needed for home energy management and home area networking. But these too, at least on the other (consumer) side of the meter, are proven in both numerous pilots and some production roll-outs. The critical standard here is the Smart Energy Profile (SEP). Originally created by the ZigBee Alliance as the application-specific upper layers of the ZigBee wireless networking protocol, SEP at its current level of version 1.1 is a mature and robust specification with new (and backwards-compatible) functionality being added regularly. And SEP version 2.0, which supports the Internet Protocol but has yet to receive final ratification, has already been selected by the U.S. National Institute of Standards and Technology for residential demand response in the Smart Grid Interoperability Standards Framework.

SEP 2.0, while still supporting ZigBee, is also network-agnostic, which has earned it additional support from a growing number of other organizations, including the HomePlug Powerline Alliance, HomeGrid Forum, SunSpec Alliance, Wi-Fi Alliance, IPSO Alliance and International Society of Automotive Engineers. This growing ecosystem is working to ensure that utilities can deploy SEP 1.1 today, and then utilize an over-the-air upgrade feature to migrate to SEP 2.0 in the future to take advantage of new capabilities, such as support for charging electric vehicles. Because the upgrade is not necessary to achieve most DR objectives, however, not all utilities will choose to migrate from 1.x to 2.x -- at least in the short-term.

The final obstacle to residential DR does indeed present a bit of a problem: the lack of a robust and inexpensive two-way communications system between the utility and the residential customers. The smart grid, with its AMI network, will obviously fulfill this need -- but only for (and until) utilities deploying one. What can utilities without an advanced metering infrastructure do to implement a comprehensive residential demand response program? Use the Internet: an existing network that already reaches virtually every home.

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